Commodities

Tea exports expected to drop 28% in FY21

Shobha Roy Kolkata | Updated on October 30, 2020 Published on October 30, 2020

Average prices of CTC were up by nearly ₹100-120 a kg during July-August on a year-on-year basis   -  THE HINDU

Drop in output and higher prices of CTC have played spoilsport says official at Indian Tea Exporters’ Association

Tea exports from India are likely to witness a 28 per cent decline this fiscal, primarily of the orthodox variety, on the back of lower production and higher prices of the CTC (crush-tear-curl) tea.

Anshuman Kanoria, Chairman, Indian Tea Exporters’ Association (ITEA), said that tea exports are likely to be around 180 million kg (mkg) this year as compared to around 250 mkg recorded in FY20, a drop of 28 per cent.

Orthodox tea accounts for less than 10 per cent of the country’s annual tea production, which is close to 1,300 mkg. However, nearly 90 per cent of the 110 mkg of orthodox produced each year is exported. According to industry sources, production of orthodox tea is lower by about 50 per cent in the current year thereby affecting exports.

On the other hand, exports of CTC tea have been impacted due to higher prices on the back of lower production this year. Average prices of CTC were up by nearly ₹100-120 a kg during July-August on a year-on-year basis. It is to be noted that CTC accounts for nearly 60 per cent of the country’s total tea exports at around 150 mkg.

A recent report by the rating agency ICRA suggests that the significant increase in Kenyan crop continued to exert pressure on Kenyan CTC teas, which declined by nearly 7 per cent in the first seven months of 2020. This is over and above the nearly 15 per cent decline their teas had witnessed in 2019. Naturally, the lower price of Kenyan tea is impacting exports of Indian CTC to some markets, which are more price sensitive.

Drop in output

The tea industry in North India (which includes gardens in Assam and West Bengal) is expecting nearly 15 per cent drop in production at around 996 million kg (mkg) in 2020 as compared with the 1,171.09 mkg recorded in 2019. While the production up to August this year is already down by around 150 mkg as per provisional estimates available on Tea Board of India website, the crop in September and October is also expected to be down due to unfavourable weather conditions.

The drop in output has impacted prices.

At the North India auction centres, for the period April-September, 2020, average prices of CTC teas were up by nearly ₹105 a kg, almost 68 per cent higher on a cumulative year-on-year basis. The corresponding increase in CTC teas from South India is around ₹37 a kg.

For orthodox teas at the North India auction centres, the cumulative increase is ₹52 a kg, almost 22 per cent higher, while at South India auction centres, it is around ₹13 a kg.

Prices, though, have been coming down over the last one month.

The price of CTC and dust at the recent sale which concluded at the Guwahati auction centre was lower by almost ₹71 a kg as compared to the sale which concluded about a month ago.

Supply-demand mismatch

“Prices have been coming down primarily because of improved arrivals. Also, typically the teas which come in September and October are relatively lower in quality as compared to those available in June, July and August. However, on a year-on-year basis, prices are still ruling higher,” said J Kalyansundaram, Secretary, Calcutta Tea Traders’ Association (CTTA).

Kaushik Das, Vice-President and Sector Head, Corporate Sector Ratings, ICRA, said that prices are likely to remain firm moving forward. Even while the export volume is expected to moderate, the domestic demand remains robust, leading to a supply-demand mismatch, thus favouring tea prices.

“The prices are expected to remain firm during this financial year, with North Indian CTC teas likely to be higher by around ₹65 a kg (up by nearly 46 per cent as compared to last year) and the orthodox prices likely to be up by nearly ₹50 a kg (an increase of around 25 per cent),” he said.

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Published on October 30, 2020
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